Arizona State’s Laura N. Coordes has a new paper up making a powerful case for overhauling bankruptcy laws for health care.  Despite the soaring, and seemingly irrational medical costs paid by patients, health care bankruptcies have been on the rise.  Since 2010, health care bankruptcies have increased by 123% while bankruptcies across all sectors have declined by 58%. The problems are not evenly distributed.  Financial distress may be most concentrated in rural hospitals.  If these hospitals continue to fail and close because they cannot address financial problems through bankruptcy, many people will be left without access to basic medical care.  As the boomer population continues to age and require ever more medical care, these problems are likely to get worse and worse.

Coordes convinced me that health care organizations differ from other entities in need of bankruptcy relief.  These bankruptcy misfits have state and federal regulators and patient communities as key stakeholders, making it a challenge for bankruptcy courts charged with maximizing a bankruptcy estate’s financial value to balance competing interests. 

Looking down the road, additional health care bankruptcies appear likely.  And as they mount, the need to put a solid, health-care-specific framework in place to address them will increase.  Hopefully, this is an area where we’ll be able to get some reforms done before too many providers close.